Supreme Court allows appeal, finding exclusive jurisdiction clause valid under Brussels Regulation Art. 23.

THE SUPREME COURT

No. 2003/02728p

Appeal No. 56/04

Geoghegan J.

Fennelly J.

Kearns J.

BETWEEN

LEO LABORATORIES LIMITED

Plaintiff/Respondent

and

CROMPTON BV (formerly WITCO BV)

Defendant/Appellant

JUDGMENT of Mr. Justice Fennelly delivered the 12th day of May, 2005.

1. This is an appeal from a judgment of the High Court (O’Higgins J) refusing the motion of the Appellant for an order that the court

decline jurisdiction, pursuant to a number of provisions of the Brussels Regulation of 2001.

2. Council Regulation EC No. 44/2001 of 22nd December 2000 on jurisdiction and the recognition and enforcement of judgments in civil

and commercial matters will be referred to as “the Brussels regulation.” It replaced the Convention on Jurisdiction and Enforcement of

Judgments in Civil and Commercial Matters signed at Brussels on 27th September 1968 (hereinafter “the Brussels Convention”).

3. The Plaintiff Company (hereinafter referred to as “the Respondent”) is an Irish company which manufactures pharmaceutical

products. The Defendant company (hereinafter “the Appellant”) is a Dutch company registered at Haarlem in the Netherlands. The

Respondent has, for many years, supplied the Appellant with raw materials for its manufacturing business.

4. Towards the end of 1998, the Respondent placed a purchase order with the Appellant for delivery during 1999 of a total quantity of

bulk molten white soft paraffin. The order consisted of a facsimile and a differently dated “purchase order.” The latter indicated a

delivery date of “not later than 31/12/99.” One of these documents had the Respondent’s Standard Printed Terms and Conditions

attached, but nothing turns on this. On 24th December 1998, the Appellant replied with a form confirming acceptance of the order

and stating “Delivery: to be stated through our shipping department.” The form concluded:

“We thank you for your order which we have accepted as follows: subject to our general terms and conditions of sale and

delivery as stated on the back hereof.”

5. The Court was informed that these terms were not, in fact, printed on the back. The Respondent claims not to have been aware of

the actual printed terms.

6. On or about 1st March 1999, the Respondent placed an order for a specific quantity. Delivery took place in or about the month of

April 1999.

7. The Respondent claims that the product was found to be contaminated with gas oil or diesel oil, when incorporated into its

pharmaceutical product and that it affected its production process causing it loss and damage.

8. The parties are not agreed upon the terms of trading between them and in particular as to whether the Appellant’s printed

conditions formed part of their trading relationship. This controversy relates to one of its provisions concerning jurisdiction. I will

discuss the matter at a later point in this judgment.

9. It is agreed that the Appellant was to deliver the product to a ship in the Netherlands, carriage and insurance paid, for transport to

tankers in Dublin Port. The parties are not agreed as to whether this means that delivery takes place in the Netherlands or in Ireland.

However, that is probably most relevant to the claim of the Appellant in contract and, as will be seen, the courts of the Netherlands

have decided that the courts of that country have jurisdiction.

10. On 25th June 1999, the Respondent wrote to the Appellant complaining of the alleged contamination of the product and stating

that it was looking to the latter to compensate it in full for the losses arising. It is not appropriate, on this appeal, to discuss the

merits of this claim, which was the subject of further correspondence, except to say that the Appellant, as conveyed in letters in

1999, denied liability. It also gave notice of its intention to rely on “Witco B.V’s standard Terms and Conditions of Sale, relevant to

this case and which are known to you.” It referred especially to a term from those conditions limiting its liability to “the net invoice

amount relating to the Claimed Product.” The Respondent, in its letter of reply dated 7th January 2000 made no reference to the

claimed reliance on the standard contract terms.

11. On 14th June 2000, the Appellant commenced proceedings against the Respondent by Writ of Summons of the District Court of

Haarlem seeking, according to a translation exhibited in these proceedings:

· A declaratory judgment of no-liability;

· Alternatively, a declaratory judgment that liability is limited to the invoice value of the goods.

12. The Dutch proceedings were duly served on the Respondent on 16th October 2000 by pre-paid post to its registered office. The

Respondent complains that these proceedings were designed to give the Appellant a procedural advantage. The Respondent could not

now issue Irish proceedings based on breach of contract. It is not unfair to observe, however, that the Dutch proceedings issued

almost one year after the original letter of complaint.

13. At the time of the institution of the Dutch proceedings, the Brussels Regulation had not yet entered into force. Since the

Respondent was clearly domiciled in Ireland, the Appellant relied on the special jurisdiction in contract permitted by Article 5(1) of the

Brussels Convention.

14. On 27th February 2003, the Respondent commenced the present proceedings by issuing a Plenary Summons claiming:

· Damages for negligence including breach of duty and breach of statutory duty;

· Damages for breaches of the Liability for Defective Products Act, 1991.

15. The Respondent has quantified its claim in its Statement of Claim at almost €3.5 million.

16. The Plenary Summons included an indorsement alleging jurisdiction pursuant to the Brussels Regulation, claiming jurisdiction by

virtue of Article 5(3) thereof on the basis that “the proceedings have as their object matters relating to the Court [sic] and the

place where the harmful event occurred is within the jurisdiction of this Honourable Court.” It was presumably intended that the

foregoing read: “relating to tort,” and not “... Court ...” It also stated that the proceedings concerning this “cause of action are the

sole proceedings and are not the subject matter of proceedings in any other Member State of the European Union between the

parties.” I have underlined the expression “cause of action.” the Appellant’s Dutch proceedings in contract had been in existence for

more than two years.

17. The Appellant entered an appearance under protest and brought its motion contesting jurisdiction in favour of the District Court

at Haarlem in the Netherlands or, alternatively, seeking an order staying the proceedings pending the establishment of the jurisdiction

of the Dutch Court.

18. Before O’Higgins J in the High Court, the Appellant disputed the reliance on Article 5(3) of the Brussels Regulation, claiming that

the action could not be founded in tort or delict. It also relied on Articles 27 and 28 which apply respectively where there is an action

in being in another Member State in respect of the same cause of action (Article 27) or which is a connected action (Article 28) and

on Article 23, claiming that there was an exclusive-jurisdiction clause in the supply contract. O’Higgins J rejected the Appellant’s

arguments under all headings and dismissed the application for a stay of the proceedings.

19. The Appellant has appealed to this court, but has effectively dropped its claim based on Article 27. In my view, it was right to do

so. The action pending before the Dutch Courts is based on contract. The action pending here is based essentially on tort or delict.

Insofar as the Respondent’s claim is based on the Liability for Defective Products Act, 1991, section 2 of the Act, which gives effect

in the State to Council Directive 85/374/EEC of 25th July 1985 (on the approximation of the laws, regulations and administrative

provisions of the member states of the European Communities concerning liability for defective products) the producer of goods “shall

be liable in damages in tort…” The Court has not been addressed at all on the basis of the Respondent’s claim under that Act or

under the Directive. I will assume for the purposes of this judgment that the claim can be made under the Act, though section 1

would appear, at first sight, to relate to damage suffered by a person using goods “for his own private use or consumption.”

20. It is apparent that it is sufficient for the Appellant to succeed in this appeal, if its arguments prevail under either Article 5 or

Article 23. If the claim is not properly made under Article 5(3), the Irish courts have no jurisdiction and the other articles are

irrelevant. Alternatively, if the contract contains a term conferring exclusive jurisdiction on the Dutch Courts, that will prevail over

any claimed special jurisdiction pursuant to Article 5.

21. I will examine, firstly, the claim based on Article 5(3). The underlying policy of the Regulation, like its predecessor, the Brussels

Convention, is that jurisdiction in civil and commercial matters should be based on the domicile of the defendant. Article 2.1 provides:

“Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that

Member State.”

22. Article 5, under the heading, “Special jurisdiction, ” so far as is relevant to the present appeal, provides:

A person domiciled in a Member State may, in another Member State, be sued:

1. (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;…………….

3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may

occur;

23. The Court of Justice considered the relationship between Articles 2 and 5 in its judgment in Case 168/02 Kronhofer v Maier and

others, delivered 10th June 2004:

“12. It should be noted at the outset that the system of common rules of conferment of jurisdiction laid down in Title II of the

Convention is based on the general rule, set out in the first paragraph of Article 2, that persons domiciled in a Contracting

State are to be sued in the courts of that State, irrespective of the nationality of the parties.

13. It is only by way of derogation from that fundamental principle attributing jurisdiction to the courts of the

defendant’s domicile that Section 2 of Title II of the Convention makes provision for certain special jurisdictional rules, such

as that laid down in Article 5(3) of the Convention.

14. Those special jurisdictional rules must be restrictively interpreted and cannot give rise to an interpretation going

beyond the cases expressly envisaged by the Convention (see Case 189/87 Kalfelis [1988] ECR 5565, paragraph 19, and

Case C-433/01 Blijdenstein [2004] ECR I-0000, paragraph 25).” (emphasis added).

24. In that passage, the Court expressly followed and largely used the language of the Opinion of Advocate General Léger delivered

on 10th January 2004. This approach, nonetheless, is different from that adopted by Advocate General Jacobs in his Opinion in Case

167/00 Verein für Konsumenteninformation v Henkel, upon which the Respondent relies in its written submissions. He rejected an

argument advanced by the French Government in that case, which appears identical with that accepted by the Court in Kronhofer.

The judgment of the Court, in Henkel also appears to have followed the Advocate General. As it happens the judgment in Kronhofer

coincides fully with the language of Finlay CJ in Handbridge Limited v. British Aerospace Communications Ltd. [1993] 3 I.R. 342. The

consequence is that Article 5(3) must be restrictively interpreted, if the Kronhofer decision is to prevail. This conflict between

judgments of the Court of Justice would certainly constitute material for a reference for preliminary ruling, if one were to become

necessary in the present case.

25. The Respondent’s claim is made in tort or delict. It is plain, on the other hand, that, in reality, the dispute arises from a contract

and the Respondent frankly acknowledges that this occurs because of the claimed “procedural advantage” secured by Appellant, by

instituting proceedings in the Netherlands. In the present state of the respective proceedings, I believe the matter must be

considered on its merits as a tort claim. The consequences of the existence of proceedings before the courts of another Member

State must be considered, if at all, by reference to Articles 27 or 28.

26. On its face, Article 5.3 of the Regulation lays down one rule only, namely that jurisdiction lies with “the courts for the place

where the harmful event occurred or may occur.” However, the Court of Justice has somewhat expanded the jurisdictional options in

tort cases. Case 21/76 Bier (‘Mines de Potasse d’Alsace’) [1976] ECR 1735 concerned a claim by a Dutch horticulturalist against a

company based in France for damage caused to its Dutch operations as a result of pollution of the waters of the Rhine by the

discharge of saline waste. The Court was required to interpret the identical provision of the Brussels Convention. It noted that the

rule was unclear in cases where “the place which is at the origin of the damage is situated in a state other than the one in which the

place where the damage occurred is situated, as is the case, inter alia with atmospheric or water pollution beyond the frontiers of a

state.” (paragraph 13). The Court was of opinion that either place could “constitute a significant connection factor from the point of

view of jurisdiction.” (paragraph 15.) It adopted a rule that, has become “settled case law,” namely that the plaintiff should have the

option to sue in the courts of either place.

27. The Court later set a limit to the options available to plaintiffs. The Appellant relies on Case C-364/1993 Marinari v Lloyds Bank plc

[1995] E.C.R. I-3719. It is stated (paragraph 14 of the judgment) that:

“Whilst it has been recognized that the term ‘place where the harmful event occurred’ within the meaning of Article 5(3) of

the Convention may cover both place where the damage occurred and the place of the event giving rise to it, that term

cannot be construed so extensively as to encompass any place where the adverse consequences can be felt of an even which

has already cause damage actually arising elsewhere.”

28. The Appellant submits that the initial damage suffered by the Respondent, if there was any, occurred upon the delivery to the

Respondent of an allegedly defective consignment of product in the Netherlands. In the later case of Kronhofer, cited above, the

Court was asked by an Austrian Court to rule on whether ‘the place where the harmful event occurred’ is to be so widely interpreted

that, in cases of purely financial damage affecting part of the victim’s assets invested in another Member State, it also encompasses

the place of the victim’s domicile and thus the place where his assets are concentrated. The Austrian plaintiff claimed to have lost

money invested in Germany through the negligence and negligent advice of the German defendants. He instituted proceedings in

Austria, claiming that he had suffered consequential financial loss in that country. It was clear that the place where the primary

damage occurred and the place of the event giving rise to it were both in Germany. Citing Marinari, referred to above, the Court

ruled, at paragraph 18, that there was “nothing in such a situation to justify conferring jurisdiction to the courts of a Contracting

State other than that on whose territory the event which resulted in the damage occurred and the damage was sustained, that is

to say all of the elements which give rise to liability.” “To confer jurisdiction in that way would” it held, “not meet any objective need

as regards evidence or the conduct of the proceedings.”

29. In order to apply these principles to the present case, as submitted by the Appellant, this Court would have to decide that the

Respondent suffered initial damage upon the delivery of the goods to it in the Netherlands. Certainly, the origin of the alleged damage

occurred, upon the manufacture of the goods in that jurisdiction. However, the Respondent’s claim is in negligence. It is not in

contract. Any claim that the Respondent might bring based on damage occurring in the Netherlands would relate to the alleged

defective quality of the goods themselves, not to any independent damage caused by their defective quality either to person or to

property. The ordinary understanding of the tort of negligence is that it requires proof of physical injury to person or to property.

Where consequential economic loss is recoverable, this is normally where physical damage has first been established. The present

case does not come within one of the exceptional categories such as negligent misstatement. Any claim based on the defective

quality of the goods delivered in the Netherlands would be for pure economic loss.

30. This understanding of the law is reflected in the Act of 1991. Sec 1(1) defines “damage” (other than for death or personal injury)

as “loss of, damage to, or destruction of property other than the defective product itself….” (emphasis added).

31. I am not convinced that the Appellant can deprive the Respondent of its option to sue in Ireland by fixing it with a damages claim

for delivery of a defective product in the Netherlands. The claim before the courts of this jurisdiction relates to alleged damage to the

finished product and the manufacturing process arising from the negligent manufacture of the product in the Netherlands. While the

case law of the Court of Justice is very helpful and seems to point in favour of the Respondent, I am not sure that the matter is

sufficiently clear to absolve this Court of its obligation to refer the matter by way of preliminary ruling to that Court unless the Court,

for other reasons, determines that it is unnecessary to do so.

32. Accordingly, I will proceed to consider the question of the exclusive-jurisdiction clause and Article 23 of the Brussels Regulation.

33. That Article provides:

“1. If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member

State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal

relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have

agreed otherwise. Such an agreement conferring jurisdiction shall be either:

(a) in writing or evidenced in writing; or

(b) in a form which accords with practices which the parties have established between themselves; or

(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have

been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of

the type involved in the particular trade or commerce concerned.

34. As already stated, the Appellant’s acceptance of the Respondent’s order contained reference to the “general terms and

conditions of sale and delivery as stated on the back hereof.” Counsel for the Respondent stated, at the hearing of the appeal, that

the Respondent had not seen the conditions before their production in Court. They were, nonetheless, before the High Court.

O’Higgins J dealt specifically with the contention that these terms did not form part of the contract between the parties. He decided

that they did. He referred to the High Court judgment of McGuinness J in Clare Taverns trading as Durty Nelly's v. Charles A. Gill

trading as Universal Business Systems and others [2000] 1 I.R. 286. He held that the Respondent “knew or should have known [of

these terms] and are attached with the knowledge of the terms of the contract.”

35. I fully agree with this conclusion of O’Higgins J. It is well established that it is for the national court to determine the terms of the

contract. I so stated in my judgment, delivered in this court, with which the other members of the court agreed, in Bio-Medical

Research Ltd. V Delatex S.A. [2000] 4 I.R. 307. I relied on the decision of the European Court in Case C-420/97 Leathertex Divisiione

Sintetici SpA v. Bodetex BVBA [1999] 1 E.C.R. 6747.

36. The following is the dictum of McGuinness J upon which O’Higgins J relied:

“In the submissions made before this Court, it was not seriously suggested that the practice of printing general conditions of

sale on the reverse side of invoices and similar documents, with a reference on the face of the document to the said

conditions, was not a common commercial practice in the type of international trade with which we are concerned here.

Indeed, from the point of view of practical experience every ordinary consumer, and still more anyone engaged in trade or

commerce, must be familiar with this type of document.

In the instant case the defendant had regularly traded with the first third party both from 1987 to 1989 and subsequently

from 1995 onwards. It is established by the affidavit of Mr. Dodd and the exhibits thereto that the defendant had repeatedly

received invoices, which included clause 19, the jurisdictional clause. At no stage had the defendant even raised a query in

regard to this clause. Still less had he refused to be bound by it. It seems to me, therefore, that the contract entered into by

the defendant and the first third party, whether it be a written contract or a contract partly in writing and partly oral,

incorporated the terms and conditions set out repeatedly on the invoices sent out by the first third party in the course of

trade. In these circumstances the Court must hold that there was consensus between the parties as to the jurisdictional

clause and that it came within the terms of art. 17 of the Convention.” [Article 17 of the Convention corresponds with Article

23 of the Regulation.]

37. It is not in dispute that the Respondent was on notice of the standard terms and conditions upon which the Appellant traded. The

Appellant’s Order Confirmation referring to them was exhibited in the Respondent’s own affidavit. Indeed the Respondent purported to

rely on standard conditions of its own. I am quite satisfied that O’Higgins J was correct to conclude that the Respondent was fixed

with the general terms and conditions of sale. It was put expressly on notice of their existence and thus put on inquiry as to their

terms. The parties were engaged in international trade. It is a very general practice of suppliers in international trade to impose

conditions relating to applicable law and jurisdiction.

38. It remains to decide whether the clause in its terms comes within the terms of Article 23, which applies to agreements “that a

court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in

connection with a particular legal relationship…….”

39. Clause 36 of the conditions reads:

“Any disputes arising out of or on account of a contract including those which are only considered as such by one of the

parties, shall be adjudicated, with exclusion of any other courts, by the court having jurisdiction at Haarlem.”

40. The Respondent submits that this clause does not prevent it maintaining its action in this jurisdiction, which is based on tort. It is

beyond dispute and is not in fact disputed that the clause confers exclusive jurisdiction on the Haarlem Court insofar as any claim is

based on contract. I confess to some sympathy with the Respondent’s assertion that it was an extraordinary move for the Appellant

to sue for negative relief in the Dutch courts. Clearly, the Appellant succeeded in pre-empting any move by the Respondent in the

Irish Courts. Against that, it is fair to make a number of observations. Firstly, the primary rule confers jurisdiction on the courts of the

domicile of the defendant, which, for such an action would have been the Netherlands. Secondly, Article 5(1) confers jurisdiction in

contract cases on the courts of the “place of performance of the obligation…” While it is unnecessary to decide the matter, there is

one plausible view that the obligation of the Appellant was to deliver the goods to the Respondent in the Netherlands. Thirdly, it is by

no means unusual in commercial matters for potential defendants to initiate proceedings claiming negative relief in the courts of their

chosen forum. Advocate General Tesauro, in his Opinion in Case 406/92 “The Tatry” [ ] E.C.R. I-5439, at paragraph 23, described

such proceedings as “generally allowed under the various national procedural laws and entirely legitimate in every respect…”

41. I now turn to consider the terms and scope of application of clause 36. I dealt with a not dissimilar problem in my judgment in Bio-

Medical Research Ltd. V Delatex S.A., already cited. I pointed out there that the Court of Justice requires national courts to scrutinize

the effects of exclusive jurisdiction clauses. At page 319 of the report, I cited a passage from Case 24/76 Ditta Estasis Salotti di

Colzani Aimo e Giamano Colzani v RUWA Polstereimaschinen GmbH [1976] 3 E.C.R. 1831, dealing with Article 17 of the Brussels

Convention at para. 7:-

"The way in which that provision is to be applied must be interpreted in the light of the effect of the conferment of jurisdiction

by consent, which is to exclude both the jurisdiction determined by the general principle laid down in Article 2 and the special

jurisdictions provided for in Articles 5 and 6 of the Convention.

In view of the consequences that such an option may have on the position of the parties to the action, the requirements set

out in Article 17 governing the validity of clauses conferring jurisdiction must be strictly construed.

By making such validity subject to the existence of an 'agreement' between the parties, Article 17 imposes on the court before

which the matter is brought the duty of examining, first, whether the clause conferring jurisdiction upon it was in fact the

subject of a consensus between the parties, which must be clearly and precisely demonstrated.

The purpose of the formal requirements imposed by Article 17 is to ensure that the consensus between the parties is in fact

established."

42. On page 317 of my judgment in Bio-Medical Research Ltd. V Delatex S.A, I referred to the judgment of McGuinness J already cited

and to one English decision dealing with the interpretation of such a clause. The clause in the Clare Taverns case read: “Any

contract of which these conditions form part shall be governed by the laws of England and the buyer hereby submits to the

jurisdiction of the English Courts.” McGuinness J approved the approach adopted by Steyn LJ in the case next cited. She went on at

page 299:

“It seems to me that this is the correct approach and is, indeed, in accordance with business common sense. The defendant's

claims of negligence, of misrepresentation, and indemnity are ‘closely knitted’ to the contractual claim, and indeed it appears

that very much the same evidence would be used in support of all the claims. If, as I have held, the contractual claim falls to

be decided by the English courts under clause 19, it would be extremely difficult and costly to pursue separate proceedings in

tort before the Irish courts. In my view all these inter-related claims must be tried together.”

43. It seems to me that the approach of Steyn LJ is particularly helpful and, like McGuinness J, I would adopt and approve it. The

case was Continental Bank N.A. v. Aeokos Cia Naviera S.A. [1994] 1 W.L.R. 588. There was a loan agreement between an American

bank and a number of Greek shipping companies. It contained a clause, which, the court held, conferred exclusive jurisdiction on the

English courts. It was argued on behalf of the borrowers that the proceedings, which they had commenced in the Greek courts, fell

outside the scope of the agreement. The Greek proceedings were based on a provision of the Greek Civil Code, which provided for

damages for violations of “the commands of morality.”

44. Steyn L.J., having held the clause contemplated the submission of disputes to the English courts went on to say at p. 592:-

"But what disputes does it cover? The answer is not to be found in the niceties of the language of cl. 21.02. It is to be found in

a common sense view of the purpose of the clause. We are emboldened to adopt this approach by the observation of Lord

Diplock in Antaios Cia Naviera SA v. Salen Rederierena AB, The Antaios [1984] 3 All ER 229 at 233, [1985] A.C. 191 at 201, that

- 'if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts

business common sense, it must be made to yield to business common sense ...’

The only sensible construction of clause 21.02 is that it is a submission of disputes in connection with the loan facility to the

jurisdiction of the English courts.

Prima facie, therefore, clause 21.02 covers the Greek proceedings. But Miss Dohmann submits that the clause cannot be

construed as extending to a claim in tort. It seems to us to be useful on this point to consider the approach adopted

nowadays in the closely analogous field of arbitration clauses. In Empresa Exportadora de Azucar v. Industria Azucarera

Nacional S.A., The Playa Larga [1983] 2 Lloyds Rep. 171 the arbitration clause covered 'any dispute arising out of this

contract'. The question was whether it covered only contractual claims or also a claim in conversion. In giving the judgment

of the court Ackner L.J. concluded, at 183,

'... the contractual and tortious claims were so closely knitted together on the facts, that the agreement to arbitrate on one

can properly be construed as covering the other.'

Moreover, if Miss Dohmann is right, it would mean that a claim for damages for a negligent misrepresentation inducing the

contract (a tort) would be outside cl 21.02 but a claim seeking rescission of the contract on the ground of the same

misrepresentation (a contractual claim) would be covered by it. If the appellant's contention is accepted, it follows that the

two claims might have to be tried in different jurisdictions. That would be a forensic nightmare."

45. The reference in that passage to the interpretation of arbitration clauses echoes the remarks of Geoghegan J in Gulliver v Brady

and others (Supreme Court unreported 19th December 2003). In that case, the relevant clause was: “arising out of or in relation to

this agreement.” The court gave it a broad, purposeful and practical interpretation.

46. It is my view that the Respondent’s claim in tort clearly falls within the scope of clause 36 of the terms and conditions. It is

impossible to consider that claim independently of the contractual relationship between the parties. The clause applies to disputes

“arising out of or on account of a contract.” Paragraph 3 of the Statement of Claim commences the narrative by pleading the

“purchase order” placed by the Respondent with the Appellant in December 1998. The affidavit of Mr Peter Young speaks of the

parties having had “a trading relationship for many years.” It says that they “traded under standard terms and conditions.” All of

this relates to a contractual relationship. One then poses the question: what is the dispute about? It is about the alleged delivery by

the Appellant of defective product. How did that product come to be delivered? Answer: it arose out of a contract. If we are to

understand words in their commonsense and ordinary meaning rather than some meaning contrived for the purpose of avoiding the

obvious, the dispute arises out of a contract.

47. Accepting, as I must, the requirement that the application of Article 23 of the Brussels Regulation should be strictly construed, I

am, nonetheless, satisfied that clause 36 formed part of the trading relationship between the parties. I am also satisfied that it is a

clause conferring jurisdiction on the Courts at Haarlem, where jurisdiction has already been established and accepted. In the terms of

Article 23, that is exclusive jurisdiction.

48. Accordingly, it is unnecessary to consider the application of Article 28. I would say, however, that, for reasons largely analogous

to those which have influenced me on the interpretation of clause 36, it seems perfectly clear to me and beyond any doubt that the

Dutch and the Irish actions are related. Article 27 deals with cases where the two actions concern the same cause of action. The

Appellant has abandoned reliance on that provision. Nonetheless, it is relevant to bear it in mind when reading Article 28. What would

be the point of Article 28 if, as argued by the Respondent, it cannot apply where one action is based on contract and the other on

tort? Of course, Article 28 merely confers discretion to stay the proceedings. If the Court had to find that the Article applied it would

have to consider whether to grant such a stay. If I had to consider that matter, it would have to bear in mind that the Dutch Courts

have established indisputable jurisdiction for the contract claim. Furthermore, the Court has been informed by the Appellant that the

Respondent will be allowed to bring a counterclaim for damages for negligence in that action. However, it is unnecessary to consider

granting a stay, when the effect of this judgment is that the Dutch courts have exclusive jurisdiction.

49. I would conclude by stating that the exclusive jurisdiction clause in clause 36 of the general terms and conditions of sale and

delivery comes within Article 23 of the Brussels Regulation. Consequently, the jurisdiction of the District Court at Haarlem is exclusive

and the Court should stay the Irish proceedings.

50. In these circumstances, it is unnecessary to reach any final conclusion on the interpretation of Article 5(3) of the Regulation and,

consequently, there is no obligation on the Court to refer any question for preliminary ruling pursuant to Article 234 of the Treaty

Establishing the European Community.

51. I would allow the appeal and make the order I have proposed.